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A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended December 31st, so let’s proceed with the discussion of the hedge fund sentiment on Arch Capital Group Ltd. (NASDAQ:ACGL).
Is ACGL stock a buy? Prominent investors were in a pessimistic mood. The number of bullish hedge fund positions shrunk by 7 in recent months. Arch Capital Group Ltd. (NASDAQ:ACGL) was in 34 hedge funds' portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 41. Our calculations also showed that ACGL isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here).
Phillip Gross of Adage Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 10 best battery stocks to buy to identify the next stock with 10x upside potential. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind we're going to take a look at the key hedge fund action surrounding Arch Capital Group Ltd. (NASDAQ:ACGL).
Do Hedge Funds Think ACGL Is A Good Stock To Buy Now?
At the end of December, a total of 34 of the hedge funds tracked by Insider Monkey were long this stock, a change of -17% from the previous quarter. On the other hand, there were a total of 23 hedge funds with a bullish position in ACGL a year ago. With hedge funds' positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
More specifically, FPR Partners was the largest shareholder of Arch Capital Group Ltd. (NASDAQ:ACGL), with a stake worth $521.8 million reported as of the end of December. Trailing FPR Partners was Polar Capital, which amassed a stake valued at $204.7 million. Point72 Asset Management, Echo Street Capital Management, and D E Shaw were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position FPR Partners allocated the biggest weight to Arch Capital Group Ltd. (NASDAQ:ACGL), around 15.36% of its 13F portfolio. Steel Canyon Capital is also relatively very bullish on the stock, earmarking 12.87 percent of its 13F equity portfolio to ACGL.
Due to the fact that Arch Capital Group Ltd. (NASDAQ:ACGL) has experienced a decline in interest from the aggregate hedge fund industry, it's safe to say that there is a sect of money managers that elected to cut their full holdings by the end of the fourth quarter. Intriguingly, Sander Gerber's Hudson Bay Capital Management dumped the largest position of the 750 funds followed by Insider Monkey, worth close to $5.9 million in stock. Daniel Johnson's fund, Gillson Capital, also dropped its stock, about $3.9 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest fell by 7 funds by the end of the fourth quarter.
Let's also examine hedge fund activity in other stocks similar to Arch Capital Group Ltd. (NASDAQ:ACGL). These stocks are Brookfield Infrastructure Partners L.P. (NYSE:BIP), Genuine Parts Company (NYSE:GPC), Mid America Apartment Communities Inc (NYSE:MAA), Elanco Animal Health Incorporated (NYSE:ELAN), Teledyne Technologies Incorporated (NYSE:TDY), J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT), and CureVac N.V. (NASDAQ:CVAC). This group of stocks' market caps are similar to ACGL's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BIP,14,51775,1 GPC,25,194872,2 MAA,26,338357,-1 ELAN,43,1493327,22 TDY,28,372237,-3 JBHT,26,330836,-12 CVAC,9,23140,0 Average,24.4,400649,1.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.4 hedge funds with bullish positions and the average amount invested in these stocks was $401 million. That figure was $1461 million in ACGL's case. Elanco Animal Health Incorporated (NYSE:ELAN) is the most popular stock in this table. On the other hand CureVac N.V. (NASDAQ:CVAC) is the least popular one with only 9 bullish hedge fund positions. Arch Capital Group Ltd. (NASDAQ:ACGL) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ACGL is 59.6. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 7.9% in 2021 through April 1st and still beat the market by 0.4 percentage points. Hedge funds were also right about betting on ACGL as the stock returned 9.3% since the end of Q4 (through 4/1) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.